In 2022, buy early — it could save you thousands

If you are looking to buy a home, the next couple of months might be the best opportunity to do so for the foreseeable future.

In the spring, the housing market awakens and competition between buyers heats up.

In the last few years, it’s been especially intense. Last year, between April and August, the average sales price of a home in Maricopa rose from $311,000 to $361,000.

Competition certainly complicates the process. But this year, there may be an added challenge to overcome: interest rates.

In January, Jerome Powell, the Federal Reserve Chairman, in a cryptic fashion, said that there would be increases this year in the prime rate.

Most in the market assume that this year the prime rate will be raised anywhere from 4 to 6 times by 25 basis points (a quarter of a percent) each time.

The Prime Rate is perhaps one of the biggest barometers for our economy. It affects interest rates on credit cards, savings accounts, car loans and, of course, mortgages. A low rate means a booming economy. When rates go up, activity slows down.

For the last few years interest rates have been historically low. This increase in rates is going to make housing more expensive. But by how much?

Let’s assume that the average house in Maricopa has a loan amount of $350,000 at an interest rate of 4.25 percent. On a 30-year mortgage, your monthly payment of just principal and interest will be $1,721.

If we raise that rate a quarter of a percent to 4.5 percent, the payment increases by $52.

If all six of those rate hikes come to fruition, that 1,721 monthly payment rises to $2,042 by the end of the year. And that does not include other monthly costs that likely apply, such as HOA fees, property taxes, homeowner’s insurance, and mortgage insurance.

This could be a boom for homes already on the market. In most cases, you can secure a rate for 60-90 days while you wait for it to close.

It might be a bust for homes that are built to order, where the wait times are up to a year now, due to pandemic-related shortages.

Those buyers will likely have to take the interest rates that are available at the time the house is completed, which could be an increase of nearly 20 percent in each month’s payment.

With lower prices than the Valley, Maricopa is always going to be an attractive.

But it’s foolhardy to ignore the strong likelihood of interest rate hikes coming this year. It might be best to get in earlier this year, rather than later.

Dayv Morgan is a Maricopa Realtor and owner of HomeSmart Success.

480-251-4231
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MaricopaHomeSmart.com

This sponsored content was first published in the March edition of InMaricopa magazine.